The Allies divide up Berlin and Germany in June 1945 before
Japan surrenders.

Winston Churchill

"We must build a kind of United States of Europe.
In this way only will hundreds of millions of toilers be able to regain
the simple joys and hopes which make life worth living." (September
19, 1946), University of Zurich

University of Zurich

Marshall Plan

Postwar European economic cooperation began with
the establishment of the OEEC (Organization for European Economic Cooperation)
in 1948 to allocate the
Marshall Plan aid (named after George Marshall who was the Secretary
of State, US). Initially $16.5 billion (by 1950, it rose to $44 billion)

With OEEC, quotas and payments restrictions were dismantled
among member countries.

The MP (a) allowed Europeans to purchase capital goods
and raw materials to start up industries, (b) helped Europeans to acquire
more reserves ($ and Gold).

ECSC, 1952

The Treaty of Paris established the ECSC (European Coal
and Steel Community) in 1952 which created a common market for coal, steel
and iron ore, covering France, Italy, West Germany, Belgium, Netherlands,
Luxembourg.

EEC and Euratom, 1957

The Treaty of Rome (1957) establishing
the EEC was signed by the same countries and ratified. The treaty set the
time table for a progressive development of a customs union. Also a separate
Euratom treaty was signed to create European Atomic Energy Community.

EFTA, 1960

EFTA (European Free Trade
Association) was formed in 1960 by UK, the three Scandinavian countries
(Norway, Sweden and Denmark), Switzerland, Austria and Portugal.

signed the Treaty on European
Union (1992). a.k.a. Maastricht Treaty. Common Foreign and Security Policy
(CFSP) and Justice and Home Affairs were included. Together with the European
Community, they form three pillars of EU.

Austria, Finland and Sweden joined the European Union (1995).
Norway declined.

2. Methods of Economic Integration

(i) Alexander the Great started the first
European integration. As a result, the Mediterranean world became one
integrated area, and Greek become the universal language adopted by traders.

Free trade was the result of military conquests.

Economic integration cannot occur unless transportation
and communication systems are well developed. In the East, the Chinese
established the Han Empire in 206 BC.

In the West, King Philip II of Macedonia began to conquer
the neighboring city states, uniting Greece in 358 BC. Alexander the Great
finished the work, conquering most states in the Mediterranean world before
his death in 323 BC. However, because of his premature death, actual integration
of the Meditrannean world had to wait until the Romans reconquered the
Mediterranean world. The Romans built roads and knew how to govern the
people, but the Europeans spoke Greek throughout the Roman Empire.

(ii) Romans also followed the same tactic.

(iii) Even in the 20th century, Mussolini tried to create
a new empire in Europe

(e.g., Mare Nostra = Our Sea = Mediterranean Sea)

(Imperial War Museum)

Similarly, Japan made a similar attempt in Asia in the
1940s.

Hitler's idea of integration

Imperial War Museum, London

Frank Haushofer (1869 - 1946) advances the theory of
geopolitics, "Lebensraum," (living space) that a race has the
right conquer neighboring regions. His student Rudolf Hess introduces
him to Adolf Hitler while he was serving in Landsberg prison. Haushofer
later becomes Hitler's adviser. Haushofer goes to Japan and learns about
a secret society of warriors called Black Dragon, and creates a secret,
copycat society "Thule Society," which uses Hackenkreuz (swastica) and later
creates German Workers Party. Hitler joins and later changes its name
to "National Socialist German Workers Party (NSDAP), known later
as the Nazi party.

Haushofer introduces the idea of axis, and persuades
Hitler to form the axis with Japan.

2. Free Trade Agreement

(i) In the 21st century, military conquests are no longer
feasible, due to the presence of the Nuclear Club.

(ii) Free trade agreements are the only possible means
to achieve economic integration in the modern world.

Gradually, counries become more interconnected through
free trade, eventually becoming an economic union.

Examples: NAFTA, European Union.

3. Stages of International Economic Integration

Autarky: before integration

(0) Preferential Trade Agreements

lower tariffs on trade among member countries.
e.g. British Commonwealth established tariff preference
scheme in 1932.

First Stage: FTA

FTA (Free Trade Area): is a group of countries without
any trade restrictions within the area, but each member country retains
its own tariff and quota system on trade with third countries (EFTA).

Industrial FTA: EFTA (exclude agriculture)

Full FTA

Problem: Nonmembers take advantage of different trade
policies among members. Member countries with lower tariffs get more trade.

Second Stage: Customs Union

CU = FTA + common tariffs and quotas.

CU (Customs Union) is created when a group of countries
removes all restrictions on mutual trade and also adopt a common system
of tariffs and quotas with respect to trade with third countries (EEC
became one in 1968).

FTA →CU: inevitable (otherwise, nonmembers take advantage
of differing tarffs among member countries)

Problem: Member countries with low wages or taxes attract
more capital.

Third Stage: Common Market

Common Market: A CU becomes a common market with the
removal of all restrictions on the movement of factors.

CM = CU + free factor mobility.

(EEC became a common market in 1992).

CU →Common Market (slow. Common heritage, language
and culture will expedite this process.)

FPE also facilitates the formation of a common market.
This transition to a common market is desirable in order to prevent nonmember
countries from taking advantage of different wages and taxes. Nonmember
countries invest in the countries where taxes and wages are lowest. E.g.,
Japan builds TV factories in Mexico, rather than in the US.

Problem: More difficult to achieve than previous forms
of integration. Common languages, culture and business practices facilitate
the formation of a common market.

3' Monetary Union: adopts a single currency together
with a single central bank.

Fourth Stage: Economic Union

supernational authorities coordinate economic policies.

EU = CM + a single currency, a central bank, a unified
fiscal authority (it should impose limits on sovereign debts. Philip IV,
the Iron King, found it easier to persecute Knights Templar than to pay
the debt, 1307 AD)

E.g., US, Belgium + Luxembourg, 1921.

CM → Economic Union (relatively easy, because of
economic gains from a single currency)

Problem: There should be a sovereign debt
limit on each nationial government. When several countries fail to pay
back their debts in full (e.g., Greece, Italy, Spain and Portugal), this
situation jeopardizes the regional currency (i.e., euro in the EU).

political union

(Single constitution. No diplomatic rights for individual
states.)

Remark

At any point in these stages, an FTA or a CU could expand
its membership. It remains to be seen if two FTAs or CUs will form one large
group. If the current continues, the world will consist of several large
FTAs or CUs. Given enough time, however, they will further integrate to
form large FTAs or CUs, until they form one world FTA.

3. Long Run Effects of Free Trade

Conjecture: Free Trade and One World.

4. Institutions of EC

US vs EU

US government consists of three branches:
legistilative, executive and judicial branches. In principle, they share
equal power and provide checks and balance.

In contrast, EU has four branches. The legislative and
executive powers are split among three branches of EU, excluding the European
Court. As more members join, institutions of EC will inevitably evolve.

Western Europe learned democracy from the Greeks, who initiated it
around 500 BC, but Amerian women gained the voting right only 1920s.

The governing institutions were modeled after the Roman
model, although Roman's Republic was replaced by an empire subsequently.

European Union

1. European Commission

2. Council of Ministers

3. European Parliament

4. Court of Justice

5. European Commission

Commissioners

The Commission has the executive
power of the EU, subject to change. The Council appoints commissioners
(Treaty of Lisbon 2009, which modifies the Maastricht Treaty, 1992)

Organization of Commission

Number of members = Initially, 20. As EU expands, the
number of commissioners increased, especially due to accession of 10
central and easter Europen countries.

Rule (2000): Each nation should have a commissioner
until the 27th member joins, in which case there will be fewer commissionsers
than member states.

Today, there are 27 Commissioners plus the President
(28 in total).
Each member specializes in some areas (e.g., energy, employment, agriculture,
etc.)

F, G, I, Sp, UK = 2

others = 1

terms = 5 years
its staff = 15,000
Must be independent of their national governments.

It now has a President. Other Commissioners act like the
Secretaries in the US. Each commissoner specializes
in one area (e.g., agriculture and reral development)

Some suggest the name should be changed to European Government.
The council appoints Commissioners.

Language

must reach all of the citizens of the union in their own
languages.

1/5 of the work is in the translation and interpretation services.

Function

The function of the European Commission roughly corresponds
to one half of US Congress.

The Commission's Role

It initiates
proposals for legislation--3 objectives European interest = what
is best for the Union as a whole, rather than for individual sectors or
countries.

Consultation =
consult as widely as is necessary

Subsidiarity =
the Union takes action only if it becomes more effective than if left
to individual member states.

Guardian of the Treaty of Rome

(i) ensures that Union legislation is correctly applied by
member states.

(ii) The commission can fine individuals, firms, and organizations
for infringing the Treaty law. One group of firms was fined ECU 248 million.

(ii) negotiate trade and cooperation agreements with other
countries or group of countries.

Accountability

The full Commission has to be approved by the European
Parliament. Commission represents EC, not member countries. Commission
reports to Parliament annually.

It is not clear who makes executive decisions.

Needs to be restructured into upper and lower houses
in lieu of Senate and the House of Representatives.

Remark

The Organization should be simple.

Simplicity determines the function of the organization.

If a mistake occurs, it is not clear who is resonsible,
or how to correct it.

6. Council of Ministers = Council of the EU ≠ European Council

aka Consilium/council

Each minister represents his/her own national
government + President + President of the Commission.

In this sense, United Nations, as currently organized,
is like EU's council of ministers.

(In the future, if it is to be properly run, United Nations
should be supported by World Court and World Parliament. Without these
two organizations, there are no checks and balance in the United Nations,
which was established as the political complement to GATT and IMF after
WWII.)

Presidency: from July 1, 1995, rotates every six months
in a sequence (not alphabetically). arrange and preside over all meetings.

Loosely speaking, Council has the legislative power.
(It is neither the Senate nor the House of Representatives.)

Council makes final decisions, but can do so only on
proposals made by Commission.

Decisions are made by unanimous vote for some, and others
by a qualified majority vote rule.

Decision Making is based on three pillars.

Pillar One

Pillar One covers a wide range of Community
policies (such as agriculture, transport, environment, energy, R&D) which
begin with a Commission proposal.

Created in 1988. Its work is limited to the competition
rules and to hearing cases against the community
institutions. It also has its President.

Procedure

direct actions are brought
by the Commission, other Community institutions or by a member state. Cases
brought by individuals or companies challenging the legality of a Community
act are taken to the Court of First Instance.

preliminary rulings by courts in the member states. Court of Justice is
not a court of appeal. National courts decide the case while observing
the principles of Community law.

After the hearing, the advocate
general delivers an independent opinion in open court. But it is
not binding, and is not always followed by the Court.

The judges arrive at their view in closed discussion,
and then delivers their judgment in open court.

The Court has the sole power to decide whether the actions
of the Commissions and Council are constitutional. The court's judgments
are binding throughout the community upon all individuals, business
firms, national governments and other Community institutions.